The April 2023 CreditorWatch Business Risk Index (BRI) has revealed that the average value of invoices (trade receivables) remained elevated in April despite other leading indicators showing that businesses are coming under increased pressure.

The index also highlighted that businesses in South-East Queensland are coming under increased pressure, with four of the 10 worst performing regions in that area and Brisbane ranking as the worst performing capital city.

Key Business Risk Index insights for April:

• B2B trade receivables are up 36% year-on-year due to rising inflation but also a resumption of ‘normal’ trading activity post-COVID.
• External administrations dipped from March to April due to seasonality but were still up 13% YoY.
• Court actions also dropped in April due to seasonality but were up 26% YoY.
• Credit enquiries were up a massive 139% year-on-year.
• B2B trade payment defaults are down from March to April but up 35% YoY.
• The regions showing the biggest improvements in the rate of business failures are Port Phillip (VIC), Cairns – South (QLD) and Warringah (NSW).
• The regions showing the biggest increases in the rate of business failures are Chatswood-Lane Cove (NSW), Wyong (NSW) and Gosford (NSW).
• Four of the 10 highest ranking regions in Australia for probability of default are located in South-East Queensland; all regions feature higher than average commercial rents, high rates of personal insolvency and lower median incomes.
• Unley in South Australia is the region with the lowest insolvency risk (across regions with more than 5,000 businesses), followed by Norwood-Payneham-St Peters, also in SA.
• Food and Beverage Services remains the industry at highest risk of default, due to its reliance on discretionary spending, which is in decline, as well as ongoing challenges such as labour shortages.
• The rate of external administrations in the construction industry continue to trend upward – sitting at a their highest point since June 2020.
• External adminstrations in the Healthcare and Social Assistance sector, while still low, are at their highest rate since CreditorWatch began reporting this data in January 2015.

The increase in receivables was consistent with the Australian Bureau of Statistics’ (ABS) Monthly Business Turnover Indicator for March, which showed year-on-year increases in turnover across 11 of 13 industries. Arts and Recreation Services recorded the highest month-on-month increase in business turnover at 9.7%, while the largest fall was in retail trade (-2.0%).

CreditorWatch CEO, Patrick Coghlan, says that the increase in trade receivables is encouraging, but other leading indicators are of concern.

“The pick up in trading activity is great to see but my excitement is tempered by our data on external administrations, in particular, which are rising across almost every industry,” he says.

“While this is a return to pre-COVID levels in most instances, the rate of external administrations in industries such as healthcare and media/telecommunications is beginning to exceed that.”

CreditorWatch Chief Economist, Anneke Thompson, says we are at an unsustainable stage in the economic cycle where business conditions are generally good but consumer demand is plummeting.

“Given all the incoming data, there is little doubt that default rates and external administrations are going to increase,” she says. “The areas that are going to be particularly impacted are those that are most reliant on labour, as labour supply still appears to be in strong demand, despite high overseas migration.”